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Ofgem’s network access SCR progresses as regulator narrows down policy changes

The SCR is looking to increase local granularity and improve DUoS and TNUoS charges.

The SCR is looking to increase local granularity and improve DUoS and TNUoS charges.

Ofgem has published an update on the Significant Code Review (SCR), having narrowed down the potential policy changes that will be included.

The review is aiming to ensure that electricity networks are used efficiently and flexibly in the face of the radical transformation the system is undergoing due to decarbonisation, digitalisation and decentralisation.

Yesterday’s open letter, entitled Electricity Network Access and Forward-Looking Charging Review: Open Letter on our shortlisted policy options narrowed down the options within the four previously outlined annexes, following on from two working papers released by the regulator last year.

A spokesperson for the Energy Networks Association said that it is “vital” that the public benefits from new technologies and services, and that the review is key to enabling this.

“Last year’s commitment from the network companies to unlock greater flexibility and to support more low carbon technologies coming onto the system was an important step forward.

“We will continue to work with Ofgem on the Access Significant Code Review to make sure that the public continue to receive the best possible service with appropriate signals about the costs and benefits they incur on the network.”

For the definition and choice of access rights, Ofgem is taking forward efforts to improve curtailment, the option of having time profiled access rights, the ability to share grid access between users in the same local area and efforts to clarify distribution users’ access right.

Meanwhile, a choice of access options for larger users and work defining and introducing choice of access for smaller users will not be taken forwards.

Ofgem is still looking at both reducing and removing the contribution to reinforcement costs, addressing the potential reforms to the upfront charges for connecting to the distribution networks. Additionally, it is looking at allowing alternative payment terms for connection charges.

Within its Distribution Use of System (DUoS) charges, more options have now been abandoned by the regulator. Four of the potential methodologies for the network cost models that could be used to set charges are being advanced, those based on forecasts of where incremental reinforcement is needed to the Extra High Voltage network, an “ultra long-run” cost model, an ultra long method that is supplemented with discounts and lastly one where charges and credits are calculated based on users’ estimated contribution to upstream network costs.

A further goal of the SCR is to increase local granularity, including looking at different time bands for time-of-use charges based on location and adjusting charges based on whether demand or generation is dominant in those locations.

How the DUoS charges will be determined will be based on more accurate time of use bands and agreed capacity rights, but not users’ maximum actual entry capacity or dynamic charging or rebates, the open letter clarifies.

Finally, it examines the Transmission Network Use of System (TNUoS) charges and how they must change to meet the needs of the changing UK system.

In order to do this, Ofgem is examining whether the reference node used to cost power flows used for modelling must be changed. Whether better locational signals are needed, along with whether charges should be based on more accurate time of use bands, agreed capacity rights or a hybrid of the two. Like with DUoS charges, entry capacity and rebates will no longer be considered.

Andrew Enzor, senior consultant at Cornwall Insight, said: “While there are no great surprises in the options which Ofgem has chosen to discount at this stage, the industry will be pleased to see this review beginning to move beyond the options listing and initial assessment phase into shortlisting and more thorough assessment.

“However, many stakeholders will now be looking to Ofgem to provide much greater detail on how the shortlisted options – which are still being considered for each aspect of the review separately – could come together into a coherent set of future arrangements."

Ofgem is now calling for responses to the option by Monday 6 April 2020, and more information can be found here.

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